Evidence-Based Decision Making

Decision making in business is a key skill, and there are many models to help you. This article discusses Evidence-Based Decision Making and how it has moved from the scientific arena to the business world.

Definition of Evidence-Based Decision Making

To run a successful business, you need to be able to make good decisions that are supported by accurate data. Evidence-Based Decision Making in business refers to addressing business issues with a logical and objective approach, using data and evidence. It evolved from medicine where experiments and data are used to develop theories and help in decision making. The issue many businesses face is not that they don’t have the data, it is that they have too much and don’t know what to do with it.

Making a Causal Argument

The main aim of Evidence-Based Decision Making is that, given all the available data and evidence, would everyone make the same decision? Does the evidence presented effectively push you towards the final outcome? This is known as a ‘causal argument’ – the evidence causes you to come to the conclusion. The thought process is “If I choose option ‘x’, then outcome ‘y’ will happen.” Evidence-Based Decision Making delivers the information to support the causal argument and to establish the desired result, based on our initial option choice. The more evidence we have, the greater our confidence in the likelihood of the outcome.

Types of Evidence

Any evidence being used to make a decision needs to be relevant. This means that it will help in making the decision and moving the causal argument along to the outcome. Evidence that is not relevant is just overloading the decision maker with extraneous ‘noise’ and will not help the process.

There is a hierarchy of evidence, showing what types are most useful:

Facts: These are real happenings that can be verified. If we are discussing scientific facts, they should be able to be confirmed using experiments.

Statistical evidence: This should still be factual so that all statistics should be backed up with factual evidence. Statistical evidence will take data obtained from a sample of the population and make inferences on the whole population as a result.
For example, ‘8 out of 10 dentists recommend this toothpaste’. This doesn’t guarantee that if you ask ten dentists eight of them will always recommend the specific toothpaste. It means that in the sample tested, this was the result so that in the whole population of dentists, it is likely that 80% of them would recommend the toothpaste. However, there may be other factors involved and statistical evidence alone can be misused.

Anecdotal evidence: This involves storytelling being involved in evidence. As a result, there is a strong possibility of personal opinion getting involved in the process which reduces the effectiveness of the evidence. However, when linked with statistical evidence, it can be effective.

Analogical evidence: This is the weakest form of evidence, and tends to be used where not much is known about the topic. It is where the suggestion is that if something is true about one thing, then it will also be true of another, just because they are similar.

Misusing evidence

In making decisions, there can be a temptation to make the decision and then look for the evidence to back it up. This can clearly create problems as we ignore the evidence that doesn’t back up our decision. This is not following the causal argument and should not be part of Evidence-Based Decision Making.

How to improve the evidence

If you can move up the evidence hierarchy, from analogical at the bottom up to factual at the top, then this will increase the likelihood of the evidence pointing you towards the right decision.
The process of gathering data can help to refine what information is needed to make the decision. It is an iterative process, as more data is gathered, more information is gleaned, and this helps the decision maker to understand what else they need to come to their conclusion.

Conclusion

The main difficulty with the causal argument is that it is most effective in a scientific arena, where experiments can be set up, controlled and repeated if necessary to confirm conclusions. In the business world, there may be other factors involved which the causal argument doesn’t take into account, for example, ethical considerations. Having said that, Evidence-Based Decision Making can help in business and can provide knowledge that increases the likelihood of reaching the desired result.

A cause and effect diagram often called a ‘fishbone’ diagram, …Read More »

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